SH - isn't there a small channel space under the foam for water to drain back to the bilge in the stern??

When you foam in the new plastic tank you will be sure to make such a channel. Look at that 2nd link that johnd posted. I agree with those instructions except the part about a plastic barrier to keep the foam from sticking to the tank. I believe you should want to have the tank stuck to the foam. The reason being that if the tank is not stuck to the foam, it can move ever so slighly. Over time, this movement will rupture the closed cells of your foam. It will then be able to move even more. Eventually your closed cell foam will be collapsed cell foam. When the cells are open they can and will absorb water like a sponge.

It sounds like most of your water came in from above via the deck opening. You will correct that. It is not unusual on an old boat for the closed cell foam to lose its structural integrity. All those waves and time takes it's toll, eventually.